The Relation Between Punitive and Compensatory Awards: Combining Extreme Data With the Mass of Awards

Abstract:     
This article assesses the relation between punitive and compensatory damages by combining two data sets of extreme awards with state court data from the National Center for State Courts (NCSC) for 1992, 1996, and 2001. One data set of extreme awards consists of punitive damages awards in excess of $100 million from 1985 through 2003, gathered by Hersch and Viscusi (H-V); the other includes the National Law Journal's (NLJ) annual reports of the 100 largest trial verdicts from 2001 to 2004. The integration of these data sets provides the most comprehensive picture of punitive damages in American civil trials to date. Combining the data sets assists in observing the punitive-compensatory relation throughout the full range of trial awards. The large H-V and NLJ awards appear to fit comfortably within the pattern observed for the broader NCSC data set. We report regression results combining the three data sets, which yield reasonable models of the relation between punitive and compensatory damages. The models indicate that the compensatory award explains more than 50 percent of the variance in the punitive award. We also find no increase in punitive or compensatory awards over time in any of the three data sets.

Keywords: punitive damages, juries, trials, litigation

JEL Classifications: K00, K13, K41

Working Paper Series